On-Bill Energy Financing Boasts Low Default Rates
As of January 2014, on-bill energy financing programs are operating or preparing to launch in the United States in at least 25 states, according to a new report “Financing Energy Improvements on Utility Bills: Market Updates and Key Program Design Considerations for Policymakers and Administrators.”
The report, prepared by Lawrence Berkeley National Laboratory staff, reviewed 30 programs that have delivered over $1.8 billion of financing to consumers for energy improvements.
Key findings include:
• Programs allowing utility service disconnection tend to have slightly higher participant default rates (1.69 percent for programs that allow disconnection, 1.05 percent for those that don’t). However, these are both very low default rates.
• Historically, on-bill financing programs have utilized public, utility bill-payer capital to fund loans. However, in recent years, there are more examples of on-bill programs that leverage private capital. Credit enhancements may be an effective way to access pools of low-cost private capital, at low risk to utility bill-payers.
• On-bill programs that have achieved significant uptake in their target market have typically taken one of two approaches: (i) allow consumers to finance almost any “energy-related” improvements with particular focus on single measures (e.g., high-efficiency equipment, windows); or (ii) access to on-bill lending is coupled with robust financial incentives such as rebates.
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